Risk Attitude And Wage Growth: Replication And Reconstruction

Executive Summary

The authors replicate Shaw (1996) who found that individual wage growth is higher for individuals with greater preference for risk taking. Expanding her dataset with more American observations and data for Germany, Spain and Italy, they find mixed support for the earlier results. They present and estimate a new model and find that in particular the wage level is sensitive to attitudes towards risk taking. Investment in human capital is risky. Both the amount of human capital produced from given effort and resources and the returns to the human capital are uncertain at the time of investment.